UK growth set to slow in 2027, OECD says

The Organisation for Economic Co-operation and Development (OECD) predicts the UK economy will experience slower growth in 2027 due to the ongoing impacts of the Iran war. The forecast suggests a modest 1% growth for the year, slightly lower than the initial 1.1% prediction. However, the organisation revised its forecast for the current year upward from 0.9% to 1.1% due to unexpected GDP figures.

Solid demand levels in Q2 of this year bolstered growth, even with increasing fuel prices. Higher interest rates are expected to slow activity in the coming year.

Despite the anticipated slowdown, the OECD acknowledges "solid" demand levels and resilient growth in various countries. However, the UK's growth may be prolonged by high inflation, which is forecast to average 3.1% this year, down from the previously predicted 3.6%. The inflation rate is expected to further decrease to 2.6% in 2028. G20 countries are projected to have an average inflation rate of 3.6% next year, exceeding the Bank of England's expectation of peaking over 4% in the coming months.

The OECD's growth forecast aligns with the more conservative estimates from other financial institutions, such as HSBC and the British Chambers of Commerce, as indicated by the Treasury. Deutsche Bank predicts a higher growth rate of 1.4% next year. UK Treasury Minister Emma Reynolds stated that the UK economy demonstrates "strong resilience" despite conflicts in the Middle East and Ukraine, emphasizing the government's efforts to support families and stimulate job creation across the nation.